To calculate the interest amount on a compound interest investment, we use the formula:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the principal amount ($4,300 in this case)
r = the annual interest rate (3.7% or 0.037 in decimal form)
n = the number of times interest is compounded per year (4 times per year, so n = 4)
t = the number of years (20 years in this case)
Now we can substitute these values and solve for A:
A = 4300(1 + 0.037/4)^(4*20)
A ≈ 4300(1 + 0.00925)^(80)
A ≈ 4300(1.00925)^80
A ≈ 4300(1.941405723)
A ≈ 8361.86
The future value of the investment after 20 years is approximately $8,361.86.
To find the interest amount, we subtract the original principal from the future value:
Interest amount = A - P
Interest amount = 8361.86 - 4300
Interest amount ≈ $4,061.86
Therefore, the correct answer is $4,061.86, which is not provided in the answer choices.
Calculate the interest amount of a $4,300 investment for a period of 20 years with a compound interest rate of 3.7% compounded quarterly.
$4,702.27
$4,681.92
$8,981.92
$4,712.18
1 answer